Price Ceilings: Rent Controls

Rent controls are a type of price ceiling. We’ll use our diagram to show how rent controls create shortages by reducing the supply of apartments available on the

Rent controls are a type of price ceiling. We’ll use our diagram to show how rent controls create shortages by reducing the supply of apartments available on the market. Rent controls also result in reduced product quality, since they reduce the returns to landlords from renting apartments. Landlords respond by cutting costs or performing less maintenance, leading to lower quality. There are search costs associated with rent controls, and they also lead to a misallocation of resources since apartments are not allocated to renters who value them the most.

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Show 1 Answer (Answer provided by Roman Hardgrave)
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Hi Maxim,
I think I'm too late for your essay but here's the answer. That graph is in the Modern Principles of Economics textbook by Tyler Cowen and Alex Tabarrok - it is from "Smith, Lawrence B. 1998. An economic assessment of rent controls: The Ontario experience. Journal of Real Estate Finance and Economics 1: 217-231."

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